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Gas prices jump as refineries shut ahead of storm

Mike Groll / AP

Motorists fill their vehicles and and gas cans in preparation for Hurricane Sandy Monday in Middleburgh, N.Y. Gas prices are likely to rise in the region until area refineries can safely reopen.

The supply of gasoline, diesel and jet fuel into the East Coast ground virtually to a halt Monday as Hurricane Sandy forced the closure of two-thirds of the region's refineries, its biggest pipeline, and most major ports.

Gasoline prices jumped as much as 11 cents a gallon on commodities markets as traders feared that power outages and flooding could leave refiners struggling to restore operations after the broadest storm ever to hit the United States. Prices later pared gains to close up about 6 cents a gallon at $2.757.

As Sandy neared the coast refinery, pipeline, port and terminal operators shuttered or reduced operations, increasing the risk that bottlenecks would keep fuel supplies from reaching customers.

"Given the recent tightness of supplies in New York Harbor, this weather event is only likely to perpetuate strength in gasoline prices," BNP Paribas oil analysts Harry Tchilinguirian and Gareth Lewis-Davies said in a research note.

Colonial Pipeline, the nation's largest oil products pipeline that connects the East Coast to Gulf Coast refiners, was set to close its main line to Philadelphia and New York, halting delivery of up to 15 percent of the region's fuel demand.

Nearly 70 percent of the region's refining capacity was on track to be idled. Phillips 66
confirmed it had completely shut its giant Bayway, N.J., refinery, the area's second-largest plant, known as the "gasoline machine" for its key role supplying motor fuel to the New York City area.

Philadelphia Energy Solutions began the precautionary closure of key units at its Philadelphia refinery, the region's biggest.

"Many of the process units have been shut down, others are in 'standby,' and the remainder have been brought to their minimum safe operating levels," said spokeswoman Cherice Corley.

The storm comes as low inventories of refined products have stirred concerns of potential price spikes during the winter heating season.

The precautionary refinery closures are more widespread than during Hurricane Irene in August 2011, when only the Bayway plant shut completely.

While refiners escaped any serious damage during that hurricane, many fear Sandy's massive storm surge -- forecast to be as high as 11 feet -- could breach plant defenses and cause damaging flooding, which can sometimes take weeks to repair. Abrupt power outages also can damage refinery equipment. 

Discussing how Hurricane Sandy could impact energy prices in the Northeast, with Matt Smith, Energy Burrito blog author.